Thursday, April 30, 2009

Updated Woodall Rodgers deck park construction timeline, costs to be unveiled Thursday afternoon

After long last, Woodall Rodgers Park is primed for construction, its parent foundation set to unveil an updated construction timeline at an event Thursday afternoon featuring Mayor Tom Leppert, among other area notables.
The roughly 5-acre "deck park," slated to cover over canyon-like Woodall Rodgers Freeway between downtown's Arts District and Uptown, should be under full construction as soon as late August, says Linda Owen, president of the Woodall Rodgers Park Foundation, which is overseeing the park's development.
"It's all going to be good news," Owen said.
Owen explains that bids for the park's heavy construction will be advertised on June 15, with bids scheduled to be awarded July 9.
At this juncture, deck park construction is projected to be complete by the fall of 2011, with various amenities atop the park ready for use sometime during 2012, Owen tells us.
She also offered updated funding numbers, saying that $77 million in government and private funds have been raised to date, including a recent infusion of $16.7 million in federal stimulus funds that will go directly toward transportation-related aspects of the project.
The stimulus money, Owen says, will help allow privately raised funds to go toward park amenity design instead of transportation-related elements, thereby expediting the overall process.
Owen expects her foundation to raise another $20 million to $25 million in strictly private over the next several years to fund development and construction of park amenities.
City leaders view the park as critical to downtown development -- a jewel-in-the-making that will attract thousands of people to the center city, immediately across from Dallas' burgeoning Arts District.
Indeed, construction of the park, initially projected for as early as 2007, has been a long time coming.
And construction itself won't be without hurdles, especially for motorists who use Woodall Rodgers Freeway. They'll likely face months of lane closures or limited use of the freeway.
All the same, Owen says, the Texas Department of Transportation, which will be responsible for the freeway's management during the deck park's construction, "does a very good job of minimizing how drivers are affected."


Dave Levinthal/Reporter

VOTE NO on Prop 2

Proposition 2 could require Dallas to conduct a citywide vote each time it wants to offer $1 million or more in subsidies to private developers of hotels, condominiums and retail facilities, every time 500 Dallas voters petition for such a vote..

What if Proposition 2 Passes?

Proposition 2 wouldn't introduce a minor tweak to the way Dallas does business. It would result in a permanent change to the Dallas City Charter that will have devastating consequences on the city's ability to attract new business.
Losing new business means losing new tax revenues. That would then lead to either higher taxes on property owners, or a reduction in city services...Or both!
The language of Proposition 2 also calls into question how the city will offer TIF funding, issue 380 grants, and use State of Texas-rebated hotel occupancy taxes - all economic development programs that have helped strengthen and stabilize Dallas neighborhoods.
In addition, if passed, Proposition 2 will lead to voter fatigue and force the city to stage elections it does not need to conduct now - elections that will cost millions upon millions of taxpayer dollars.

Wall Street Journal Takes Notice of Dallas Convention Center Hotel

Mr. Crow and his family's investment vehicle, Crow Holdings, are the primary financial backers of an initiative seeking to prohibit city ownership of convention hotels. The initiative is responding to a plan by the Dallas City Council to build a $356 million, 1,000-room hotel on eight acres adjacent to the Dallas Convention Center. Dallas voters cast ballots on May 9.

The Crow-led antihotel effort has raised roughly $2.7 million, mostly from Crow interests. They argue the hotel will burden the city's balance sheet.

Often left unsaid is that the Crow family owns the 30-year-old, 1,600-room Hilton Anatole hotel, which hosts its share of convention-goers.

Mr. Crow, the 59-year-old scion of the late development-and-brokerage magnate Trammell Crow, declined to comment.

City officials say the hotel plan will succeed because the city can borrow at lower rates than private developers and a planned $50 million reserve account for the hotel will cover shortfalls. The city would issue revenue bonds to finance the hotel, to be managed by Omni Hotels.


Record CRE Loan Defaults Expected This Month

Falling Prices Hindering Already-Difficult Ability To Refinance Loans on Time

An uptick in both the number and average loan size of new defaults resulted in a one-quarter point climb in March CMBS delinquencies to end the month at 1.53%, and there are significant indicators that point to record climb in defaults in April as well, according to Fitch Ratings. In recent months, Fitch has observed a notable increase in the rollover rate of loans that move from 30-days to 60-days delinquent. As such, the current 30-day delinquency is reliable measure of loans that could go into default. Of the Fitch-rated loans that were 30 days delinquent in February 2009, approximately 73% remained in default. This compares to a rollover rate of only 21% one year prior. If the measure continues to function as a reasonable predictor of 60-day defaults, the $1.86 billion of loans 30 days delinquent in March, coupled with additional expected maturity defaults, could produce a record increase to the index this month. Also worsening the outlook for CMBS defaults are the marked decreases in property values reported for all commercial property types in the first quarter, as noted by CoStar Group. According to separate analysis by Moody's Investor Services, the significant decrease in commercial real estate prices seen in the last several months has resulted in price depreciation on average for properties backing loans that were originated as far back as 2005. If this trend continues, it would increase the risk that these loans could fail to refinance at maturity. Although not necessarily representative of the broader commercial real estate loan market, Moody's noted that few CMBS loans maturing in the next two years are from vintages with more than 10% price depreciation. The financial ratings firm expects to see a continued decline in commercial property prices in the coming months as property fundamentals continue to erode and cap rates continue to rise. Senior real estate executives also said they believe asset values will continue to slide as access to capital remains constricted, according to The Real Estate Roundtable Sentiment Survey for the 2nd quarter 2009. "If current conditions are allowed to weaken further, the possibility of widespread commercial real estate loan defaults will transform today's threat into an ominous reality," said Jeffrey D. DeBoer Roundtable president and CEO. "It is clear that the nation's frozen credit markets currently do not have the capacity to meet a looming wave of commercial real estate loan maturities."
Newer Loans Make Up Biggest Chunk of DefaultsThe 2006 through 2008 CMBS' vintages, which represent 56.6% of the Fitch-rated universe, now account for approximately 53.8% of all delinquencies, according to Fitch Ratings. The recent vintage defaults are rising at a relatively fast pace compared to averages indicated by historical default curves. "Continued larger loan defaults within the index are indicative of the moderate to severe macroeconomic stress environment that Fitch now views as applicable to U.S. CMBS performance," said Susan Merrick, Fitch managing director and U.S. CMBS Group head. "Recent vintage transactions, which are typically more concentrated by loan balance and have greater exposure to larger loans without stabilized income at issuance, will prove particularly susceptible to future losses attributable to the prolonged macroeconomic downturn." In March 2009, 202 loans rated by Fitch totaling $1.7 billion became newly delinquent. Excluding small balance and B note loans, the average size of the new defaults was $10.1 million. Twenty-one loans with a balance exceeding $20 million were added to the index last month, of which 15 were collateralized by retail properties. New defaults included the $86 million Metropolis Shopping Center in Plainfield, IL; the $81 million Southland Mall in Hayward, CA; and the $74 million Deerbrook Mall in Humble, TX. The average loan balance also continues to rise on a monthly basis. As of March, the average size of traditional CMBS loans within the index stood at $9.2 million, compared to $6.9 million six months prior. The $225 million Riverton Apartments loan, resolved following repayment of outstanding advances and interest on advances from the reserve accounts and letters of credit, and represents a notable removal from the index. However, Fitch expects that loans secured by high-profile properties will continue to default. Fitch's delinquency index includes 1,270 delinquent loans totaling $7.4 billion, out of a Fitch rated universe of approximately 44,000 loans totaling $481 billion. Following a 48% month-over-month increase in total delinquencies, the retail sector has nearly matched multifamily as the leading property type within the index by balance, at $2.5 billion each. When ranked by delinquencies within their individual property types, the multifamily sector continues to lead with a 3.59% rate, followed by retail at 1.79%, lodging at 1.48% and office at 0.65%.
Land Now Accounts for Most CDO DelinquenciesTwenty-one newly delinquent assets also led to an increase in U.S. commercial real estate loan CDO delinquencies to 6.5% for March 2009, up from 5.4% in February 2009, according to Fitch Ratings. Excluding repurchased assets, nearly all of the new additions consist of matured balloon loans. "Further maturity defaults are likely as the illiquid credit markets provide limited prospects for the payoff of loans," said Karen Trebach, a Fitch senior director. Non-cash flowing property types comprise the highest percentage of delinquent commercial real estate CDO assets. Loans backed by interests in land are now the highest percentage of assets (approximately 32%). Condominium conversions and construction loans comprise an additional 11.1%. "Under the current credit market conditions, Fitch anticipates increased defaults on land loans as debt service reserves burn off and business plans fail to actualize," Trebach said. Fitch currently rates 35 commercial real estate CDOs encompassing approximately 1,100 loans and 370 rated securities/assets with a balance of $23.8 billion. - Mark Heschmeyer

7-Eleven hires company to perform 'comprehensive review'

Some of 7-Eleven Inc.'s landlords may be taking a big gulp.
The iconic convenience store chain said Wednesday that it has hired international real estate service firm CB Richard Ellis to make a "comprehensive review" of all of its U.S. store locations.
CB Richard Ellis said the task will "include analyzing fair-market values for 7-Eleven's retail sites and negotiating lease terms, when appropriate, in line with current commercial rental rates."
That means lower rents.
It's something other big retailers have pressed upon landlords because of the tough economy.
"This is prudent business practice for any retailer during these unusual economic times, particularly with the footprint that 7-Eleven has nationwide," Mike Friedman, a CB Richard Ellis senior vice president in Dallas, said Wednesday in an announcement that effectively puts the retailer's landlords on notice.
"Through our analysis, we believe we will discover solutions that will assist 7-Eleven in reducing its overall operating expense."
The company operates about 5,700 stores in the U.S., including 263 in the Dallas-Fort Worth area.
Real estate brokers say there's a lot of buzz in their business about retailers getting rent cuts, but they question just how much is going on.
"If you have a lease on a property, you usually have a lender involved and it's not the easiest thing to just go reduce rents," said W. Thurston Witt Jr. of Dallas-based United Commercial Realty.
"There has been a lot of discussion about it, but I don't know how much success there has been at this point." Real estate service firm CB Richard Ellis was hired to help 7-Eleven reduce its overall operating expense. " - Steve Brown/DMN

Tuesday, April 28, 2009

Behringer Outsources Maintenance To ABM

DALLAS-In a move to improve resources and efficiency, Behinger Harvard will outsource engineering, maintenance and consulting services to ABM Industries Inc. The San Francisco, CA-based ABM Industries is already at work, reviewing local Behringer Harvard's commercial real estate portfolio to determine any problems or potential problems.

Behringer Harvard chief administrative officer Jason Mattox tells that company engineers will, under certain circumstances, be transitioned to ABM Industries. Also, as part of the agreement, Behinger Harvard engineers and maintenance staff will have access to ABM Industries' training and resources.

Mattox says the move won't be disruptive to tenants. "ABM is familiar with meeting the needs of office tenants," he says. "They know how to provide exceptional customer service and they fit with the culture of Berhinger Harvard and our property management organization."

Mattox explains that the company decided to outsource in an effort to boost efficiencies with use of fewer resources. ABM Industries was the logical choice because of its prior long-term relationship with Behringer Harvard. After a review of the companies in the marketplace, ABM Industries brought the most to the table, Mattox says.

Though Mattox declines to elaborate on whether the ABM Industries partnership will be the start of future outsourcing moves, he did say there might be times during which Behringer Harvard would consider "calling on the resources of groups outside our own company."
"In this economy, competition is stiff for tenants, and we plan to do everything we can to retain tenants at our properties," he adds. "ABM represents a good way in which we can do that."
By Amy Wolff Sorter with

Dallas-area home prices slide 4.5% in S&P/Case-Shiller report

Dallas-area home prices were down 4.5 percent from a year ago in the latest measure by Standard & Poor’s/Case-Shiller.

Dallas’ decline compares with an overall 18.6 percent nationwide drop in prices in February from a year earlier, according to the closely watched index which was released Tuesday.

Dallas had the smallest price decrease among the 20 cities surveyed.

And February’s local numbers showed a slight improvement from January, when the Dallas index was down about 4.9 percent.

“While the declines in residential real estate continued into February, we witnessed some deceleration in the rate of decline in some of the markets,” S&P’s David M. Blitzer said in the report. “We will certainly need a few more months of data before we can determine if home prices are finally turning around.”

The annual rate of home price decline slowed in nine of the 20 metropolitan areas the index tracks each month. It was the first time since late 2007 that the nationwide index did not show a record decline.

But many cities still saw huge drops in prices, including Phoenix (-35.2 percent), Las Vegas (-31.7 percent) and San Francisco (-31 percent).

S&P analysts said Dallas-area home prices are down 11.1 percent from their peak in mid 2007. In Phoenix – the hardest hit market – home prices have fallen more than 50 percent since 2006.

The Case-Shiller survey tracks the prices of typical single-family homes located in each metropolitan area. The index survey does not include condominiums and townhouses. It only covers pre-owned properties – no new construction.

The Case-Shiller researchers compare sales of specific single-family homes over time.

The latest local home market estimates show that prices were down 8 percent in the first quarter compared to the same period of 2008. Those figures are based on sales of pre-owned homes through the real estate industry’s multiple listing service.

Metropolitan area Feburary 1-year change
Atlanta -15.3%
Boston -7.2%
Charlotte -9.4%
Chicago -17.6%
Cleveland -8.5%
Dallas -4.5%
Denver -5.7%
Detroit -23.6%
Las Vegas -31.7%
Los Angeles -24.1%
Miami -29.5%
Minneapolis -20.3%
New York -10.2%
Phoenix -35.2%
Portland -14.4%
San Diego -22.9%
San Francisco -31.0%
Seattle -15.4%
Tampa -23.0%
Washington -19.2%
Composite-20 -18.6%

SOURCE: Standard & Poor's and Fiserv
By STEVE BROWN / The Dallas Morning News

Monday, April 27, 2009

HREC Arranges $13 million Loan for Doubletree Hotel

HREC Investment Advisors has arranged $13 million in senior financing for the 228-room Doubletree Hotel - Dallas Market Center, located at 2015 Market Center Blvd. in downtown Dallas. The loan includes a t-year term and a 7 percent fixed interest rate. The lender was a Texas based bank. The Doubletree Hotel is owned by Market Center Lodging LP and operated by Alliance Hospitality Management.

Texas Capital Bank Building Opens

The Texas Capital Bank Building, a 20 story, 507,000-square-foot office building located at 2000 McKinney Ave. in uptown Dallas, has opened. The tower, which was designed by HKS Inc., includes street level restaurant and retail space, a 1,300-space parking garage built into the building's base and 15 residential units along the building's Woodall Rogers Freeway frontage. The property's office component is currently 35 percent occupied by a tenant roster that includes Texas Capital Bank and Corrigan Properties. Occupancy will increase to more than 80 percent by late spring when Lincoln Property Co. takes moves into its offices.

Multifamily Living and New Urbanism

A look at why many investors are seeking multifamily communities that capture the New Urbanism movement.

Approximately 83 percent of America’s population resides either in a metropolitan area (defined as a city with more than 50,000 residents) or its surrounding suburbs, according to Praxis Strategy Group’s analysis of 2006 census and labor statistics. The biggest population growth nationwide is occurring in urban hubs in the South and the West — now home to seven of the 10 most populous cities — and especially in the metropolitan suburbs of those regions.

Strong demographic and economic trends also are contributing to a “new urbanism” that is changing how Americans want to live and work — both in our cities and their surrounding suburbs. A combination of lifestyle and economic factors, as well as heightened environmental consciousness, are all contributing to New Urbanism.

Many real estate investment companies are responding to this trend by targeting investments in transit-oriented multifamily communities, both completed and to be developed, that are located in urban areas and their surrounding suburbs. This approach is part of a strategy for multifamily investments aligned with forecasted demographic and economic trends that could impact the demand for multifamily housing, both in the near term and farther into the future.

By targeting established and stable markets in the top 50 Metropolitan Statistical Areas and metros in the Sunbelt that are experiencing high population growth, REITs and other investors are seeking multifamily communities that attract those who want to live and work near the central business district (CBD) and its extensive options for shopping, dining and entertainment.

What is New Urbanism?

New Urbanism is a design movement that promotes the development of communities — both in urban areas and their surrounding suburbs — where people can live, work and play. Easy access to a range of housing, retail, cultural and employment options is an important goal. Developers borrow from traditional principles of neighborhood design, many of which are reminiscent of the small towns of the past, and add a few new twists for residents that appreciate amenity-rich living for today. Pedestrian-friendly design elements encourage walking and a greater use of bicycles, rollerblades, and scooters. Proximity to public transportation, such as light rail stations, can provide commuters with opportunities to reduce their dependence on personal vehicles, potentially reducing energy costs and conserving energy resources.

Demographic Trends

Multifamily living is a distinct alternative to single-family housing that offers benefits that vary depending on a potential resident’s age and stage in life. People often seek multifamily housing during multiple phases of their lives — first during early adulthood, and again as they subsequently approach retirement. Virtually everyone is a consumer of multifamily housing at some point.

Baby Boomers. Baby Boomers are the 79 million Americans who were born between 1946 and 1964. As their children leave the nest, single-family home ownership sometimes becomes less attractive. As they prepare for retirement, it can make good financial sense for Baby Boomers to downsize from the larger homes they preferred when raising a family. Multifamily housing can allow them to downsize while gaining access to state-of-the-art amenities without the cost of extensive renovations to their older, single-family homes. With lower household maintenance requirements, Baby Boomers can save time and money that can be used to travel or participate in the social and cultural activities offered more abundantly in urban settings.

According to Marilynn Mobley, a senior vice president with Edelman Public Relations specializing in research-based insights about Baby Boomers, Boomers are increasingly seeking places where they can mix an affordable lifestyle with a great social life. They also like amenities. After spending years raising children, commuting, mowing grass and entertaining in their large suburban homes, many Boomers are ready to let someone else worry about the upkeep.

“Too many developers have assumed that Boomers all want ranch condos in ‘active adult’ communities for those 55 and up,” Mobley says. “Some do, but just as many are ready to try the urban lifestyle for a change.”

Generation X and Echo Boomers. The Echo Boomers, those born between 1980 and 1994, are an especially important demographic group because, with a population of 73.7 million in 2007, they are nearly as numerous as the Baby Boomers. Combined with Generation X, those born between 1965 and 1980, these generations of young Americans are expected to provide a historically strong driver for near-term growth in the demand for multifamily housing.

Echo Boomers are more than 30 percent more likely to live within 3 miles of a city center than those of prior generations, according to The Concord Group, a boutique real estate consulting firm based in Newport Beach, California.

“They prefer… character, distinctive architecture, and style,” The Concord Group says. “Think urban density, infill, transit-oriented development and the kind of adaptive reuse of existing properties that typically comes with today’s downtown redevelopment efforts.”

The Concord Group also believes that Echo Boomers prefer smaller 24/7 communities where they can live, work and play with less dependence on personal transportation and a stronger sense of place than most traditional suburban areas offer.

Economic Trends

Sharply higher costs for food and energy are impacting all Americans, regardless of their age. Inflation in consumer prices averaged a comparatively low 2.5 percent per year from 1993 to 2006. But consumer prices rose at a 4 percent annualized rate in 2007. By July 2008, that rate had spiked to 5.6 percent — the highest inflation rate in 17 years. Living closer to where one works and plays is a way Americans can reduce energy costs and provide much-needed relief for household budgets. At the same time, the environment can benefit from reduced pollution and improved land use and sustainability.

From Infill to the Suburbs

Some multifamily developments help bring new vitality to underused areas near the urban core that previously may have been in decline. This approach enables potential residents to make better use of any existing mass transportation infrastructure, which can reduce pollution, conserve energy, and reduce costly dependence on personal transportation. Closer proximity to the city’s amenities provides lifestyle advantages preferred by Baby Boomers and Echo Boomers alike.

Host cities benefit from improved land use when people are brought back to older parts of the city that may have been overlooked and underused. Because development in these areas can increase the city’s tax base, tax incentives are sometimes offered to developers as part of the city’s initiatives to promote urban renewal. The increased city tax base helps provide funding for urban renewal investments such as improvements to the public transportation infrastructure. As urban renewal progresses, demand for housing in these areas could rise, potentially increasing the value of multifamily developments located nearby.

The American Association of Retired Persons, known as the AARP, forecasts that residential demand for transit-oriented developments will grow from 6 million households in 2000 to 16 million households by 2030. They expect growth to be modest through 2010 and then accelerate as transit systems are constructed and expanded.

Selected multifamily developments are providing many of the lifestyle benefits of urban areas to those who prefer to live in the suburbs. Multifamily communities often improve suburban land use and reduce sprawl by increasing demand for suburban businesses and developing near commuter stations for mass transit.

For the Future

In the next few years, transit-oriented multifamily communities in both urban and suburban locations will become more prominant on the real estate landscape — providing plenty of multifamily living options for residents of all ages.

Mark Alfieri

Dallas investor buys former Westminster Presbyterian Church in Uptown

Dallas investor Ray Washburne has purchased an historic Uptown building

The former Westminster Presbyterian Church at Fairmount and Mahon streets was built in 1909 and is one of the few remaining churches in Dallas’ booming Uptown neighborhood.

The 20,000 square-foot building was converted into office space more than 20 years ago and houses several tenants.

“We are going to keep it as office and gallery space,” said Washburne, who owns other property in Uptown. “It’s been restored and is an historical structure.

“We bought it as an investment.”

The building was purchased from a local trust and terms of the transaction were not disclosed.

The former church was designed by noted Dallas architect Herbert Miller Greene, who did several Dallas-area churches. He also worked on the flagship Neiman Marcus store on Main Street and the historic Titche-Goettinger department store.

Greene also designed multiple buildings for the University of Texas’ Austin campus.

The Dallas Morning News

Dallas Convention Center hotel debate in its final stretch

On the eve of early voting, advocates and opponents of a Dallas Convention Center hotel launched a final effort to convince residents of the merits – or lack thereof – of such a facility.

"We need to do this to produce jobs ... we need this to produce taxes," Dallas Mayor Tom Leppert told prospective voters in arguing against passage of Proposition 1, a ballot initiative that seeks to amend the city's charter to prohibit public ownership of convention hotels.

But Donovan Wheatfall, a former Fort Worth City Council member who opposes public ownership of convention hotels, told the small and generally pro-hotel audience gathered Sunday at Friendship-West Baptist Church that Dallas will jeopardize taxpayer money if it owns a convention hotel.

If Fort Worth attracted a privately owned convention center hotel to its city, which it accomplished earlier this decade, Dallas could, too, Wheatfall contended.

"What we found out through studies ... is that the people would be completely on the hook if we owned it," said Wheatfall, speaking on behalf of Citizens Against the Taxpayer-Owned Hotel, which is bankrolled by real estate mogul Harlan Crow. "You are pledging future revenues of the city to pay for the hotel. That to me fundamentally is a problem."

Leppert acknowledged that "there's no guarantees out there" when it comes to the potential effect on taxpayers from public ownership of a hotel.

But funding the project with revenue bonds, paid back by hotel users, will shield Dallas taxpayers from risk. The greatest risk is inaction, the mayor said.

"If we don't move forward on this, we will see this industry continue to decline," Leppert said, adding that a convention hotel is designed to attract hundreds of thousands of conventioneers who will spend hundreds of millions of new dollars in Dallas. "Without an expanded tax base, either we cut more services, or we put more taxes on you."

The mayor continued: "If you look at my background, you'd think I was on the other side. I'd like to see the private sector do 100 percent and the public sector do zero."

But private ownership won't work in this economy, Leppert said, explaining that Dallas can build the hotel at less cost by capitalizing on tax-free financing. "We don't have other options sitting out there. We've been at this for 25 years. We have to move forward – there's too much at stake not to."

And what if the hotel is a failure, unable to pay its bills because not enough people are staying there? Wheatfall asked.

"Then you still have to service those revenue bonds," he said. "By doing it privately, you can still get the same results and not have the Dallas taxpayer on the hook."

Wheatfall urged southern Dallas residents to focus less on who is supporting or opposing Proposition 1 and make a decision on the issue's merits.

"The African-American community here in south Dallas has to ask itself ... as a citizen, as an individual, how does this benefit me?" Wheatfall posited.

No matter whether Dallasites support or oppose Proposition 1, they should vote regardless, the Rev. Frederick Haynes III, a longtime Leppert supporter and leader of Friendship-West, told the audience.

"We literally find ourselves at a crossroads as a city," Haynes said.

Several politicos – sitting and would-be – attended Sunday's forum, including Deputy Mayor Pro Tem Dwaine Caraway, District 8 council member Tennell Atkins and District 5 council candidate Tiffinni Young.

Caraway, who was sitting in the audience, panned Citizens Against the Taxpayer-Owned Hotel for not sending a Dallas-based representative to the forum.

"All of a sudden, those people don't show up. Today, they're not here to answer the concerns," Caraway said.


By DAVE LEVINTHAL / The Dallas Morning News

What's on Dallas real estate investors' minds? Lots!

The biggest homebuilding slowdown on record has left the Dallas-Fort Worth area with lots of empty lots.

A subdivision street sits empty in the Cattle Ranch development in Celina. Home starts have fallen off sharply in Dallas-Fort Worth, especially in the far reaches of the area. More than 90,000 D-FW home lots are ready for building.

How many? Enough to last more than five years, according to the latest estimates.

"Home starts have declined almost 67 percent while the lot supply has fallen only 2 percent," said local housing analyst Ted Wilson.

For investors, those unwanted properties offer the potential for profit.

More than 90,000 vacant home sites are sitting ready to go – many in far suburban areas of Dallas-Fort Worth. And there's even more surplus residential land planned for housing developments that have been put on hold.

"It may take many years for those markets to work down the oversupply," said Wilson, who's with Residential Strategies Inc.

The glut of home lots and land has caused builders to take billions of dollars in financial write-offs and left some lenders holding the bag with shaky loans.

Buyers are watching to see how low lot prices will go.

"We've set up our company to take advantage of what we saw coming to the market – a great deal of distressed assets," said Dallas businessman Larry Taylor, who just formed a partnership with an affiliate of Starwood Hotels & Resorts to buy land and lots in North Texas.

Taylor and his local partners have been in the residential development business in North Texas for more than two decades. And he knows firsthand how to profit from other folks' problems.

"We did this in the late '80s, when we bought tons of property from the FDIC and RTC [Resolution Trust Corp.]," said Taylor, who acquired the troubled real estate at bargain prices and then resold or developed it. "We did very well on that."

That's the plan this go-round, too, although "it's more of a gamble right now," Taylor said. "This time, it's the entire economy that's in trouble, not just real estate."

Preparing to pounce

Still, Taylor's new TD Star Land plans to initially invest $75 million in lots and vacant residential land in the D-FW area.

"We are probably looking at 30 deals a month," he said. "But so far, we haven't bought anything.

"We just need to make sure we buy assets at a price we can hold them for a few years until the market comes back," Taylor said. "It's an eight-year fund, so we have ample time to buy assets."

Another Dallas-based investment group, RSF Partners, has already started reselling properties from a major purchase it made last year.

"We sold some of it early at good prices," said Chris Mahowald, managing partner of RSF Partners. "We've sold lots and in a couple of cases sold land in bulk."

RSF paid Dallas-based builder Centex Corp. $161 million to acquire 8,500 lots and other properties in 11 states. The purchase included more than 1,400 lots in the Artesia subdivision in Prosper.

"There has actually been some interest from buyers, but none of it evolved into a sale," Mahowald said.

RSF made the purchase without debt.

"We have the benefit of not being under any capital pressure," he said. "Our general view is the holding period is going to elongate."

Waiting for the rebound

With lot construction at less than half the level of 2006, analysts know there will be a squeeze on supply when the building market rebounds.

"As the demand for new homes strengthens, the demand and prices of lots will quickly firm up in the high-growth areas," said David Brown, who heads the Dallas office of housing analyst MetroStudy Inc.

"Most of the investors are looking to purchase well below replacement cost, like they did in the late '80s and early '90s.

"In most instances, the prices these investors are looking to pay today will allow for holding periods of three years or longer," Brown said.

"We have seen instances in the toughest submarkets of lots selling for 50 cents on the dollar – a $28,000 lot selling for $14,000," Wilson said. "Problem is, not many builders are willing to step up and buy" even inexpensive lots at this point.

Most lots now being sold are going to investors, he said. "Investors can often buy these lots below replacement cost, but there may an extended hold period until he can resell."

Most analysts are betting that the North Texas homebuilding market will bottom out this year and begin a slow recovery.

"These investors understand once the economy strengthens, the D-FW market will get back to the significant population growth we have seen over the past decade," Brown said.
By STEVE BROWN / The Dallas Morning News

Surveillance cameras cut crime downtown, but monitoring them is getting too expensive

Spend time in downtown Dallas, and there's an increasingly good chance your movements will be caught on city surveillance cameras. Less certain is whether a police officer will be watching at the other end of that video feed.

A security camera at Main and Griffin streets is one of 82 downtown. The $8,000 to $10,000 to buy a camera is only the start of the expense to monitor public areas. The cameras have multiplied since the program began two years ago, and Dallas police say they have reduced crime.

Their number downtown stands at 82, and there are 14 more in Jubilee Park.

But as more cameras are installed and more neighborhood groups look at acquiring them, police say the city must figure out which ones get monitored and who is going to pay for it all.

"Cameras have helped reduce crime in such a dramatic manner that we are victims of our own success," Dallas Mayor Pro Tem Elba Garcia said Monday as she introduced the issue on the City Council's public safety committee agenda.

In the central business district, police say they've made 1,700 arrests during the last couple of years thanks to the cameras. Meanwhile, crime there so far this year is down 11 percent from 2008.

In September, the cameras helped capture a murder suspect after several people broke into a coin-operated newspaper stand. Police watching a video feed spotted the thieves trying to hide near the downtown library. Officers arrested two people, one of whom turned out to be wanted in a Fort Worth slaying.

The cameras were bought with money from neighborhood, business and philanthropic groups. They cost $8,000 to $10,000 each and thousands more dollars to link their feeds to the police dispatch center.

Police, meanwhile, have provided the manpower to monitor them. Retired and light-duty officers watch feeds 24 hours a day, zooming in on people of interest.

Industry standards recommend one pair of eyes for each 25 cameras. But in Dallas, usually only two employees juggle the nearly 100 feeds at any given time.

"There's different staffing on each watch, but generally right now, we do not have the ideal staffing down there for the cameras," Deputy Chief Tom Lawrence said.

This, as dozens more cameras have been proposed and are expected in places like Fair Park, Uptown, White Rock Lake, and along Jefferson Boulevard in Oak Cliff. Money raised by neighborhood groups is helping pay for them.

"I believe they're seeing the effectiveness of the cameras, and they want to see if they can partner with the police department," Lawrence said.

At Monday's meeting, Dallas police recommended that the city pay to monitor the cameras only in designated violent-crime hot spots. In other areas, neighborhood and business groups would have to pay for the manpower themselves.

The committee members agreed and voted to take the recommendation to the full council.

Police say it costs about $250,000 a year in manpower to monitor one station of 25 camera feeds around the clock.

"If you have a location that has an overriding community concern, the department may be willing to monitor those," Lawrence said after the meeting. "We're not trying to get a hard and fast rule, we're just trying to get some guidance here."

One group that would be affected, the White Rock Lake Conservancy, has been raising money to fund installation of cameras in the lake's parking lots, hoping to target the problem of car burglary.

"It's much more manageable today at White Rock, but we think we can even bring those numbers down a great deal more with security cameras," said Gary Griffith, chairman of the conservancy.

The group has raised $30,000 so far and hopes to install cameras before the end of the year.

But Griffith, contacted Monday evening, said he was not aware of the proposal that groups like his – those not in violent-crime hot spots – would also have to pay to have the cameras monitored.

"We think we need to raise about $90,000 for the hardware – that does not include any monitoring charges," Griffith said. "So if the city approaches us about that, then we'd have to sort of hear what that is, and how to quantify that, because it's all news to us."
By STEVE THOMPSON / The Dallas Morning News

Friday, April 24, 2009

Minor league ballpark planned near Trinity River

By STEVE BROWN / The Dallas Morning News

A real estate and sports group has purchased a large development site on the banks of the Trinity River near downtown. The new owners of the 60-acre property on Industrial Boulevard say they hope to build a $500 million mixed-use project anchored by a minor league baseball park – set to open next year.

The team working on the project includes Oak Cliff developer Richard Seib and Reunion Sports Group LLC, a minor league baseball company headed by former Dallas congressman John Bryant and his partner Byron Pierce.

The new owners bought the property with the approval of lenders who recently had posted the land for foreclosure.

A large-scale apartment and retail development was previously planned for the site near Cadiz Street, but that deal fell through.

"We are very excited about the opportunity to develop this property," said Matt Holley, a local builder who is working with Seib on the Industrial development and his $200 million La Reunion Town Center project in Oak Cliff. "There is still a lot of planning to do.

"Our intention is for the ballpark to be up and operational in 2010."

The development group says it plans to do the project with private funding. The land has been purchased, but financing has yet to be arranged for much of the development.

Also Online
Download: Site plan for proposed minor league baseball stadium (.pdf)
Pierce said the plans for the ballpark are on the fast track with an opening set for next May.

"We think it's one of the best markets in the U.S. for a minor league baseball park," he said. "The movement for minor league baseball now is to come into the large metropolitan areas.

"Businesses are moving back into the downtown area, bringing young professionals and families," he said.

Reunion Sports Group
An artist's rendering of the proposed minor league baseball stadium.
View larger More photos Photo store
Besides the ballpark, the new owners envision a water park and hotel, 2,500 apartments, retail and restaurants. A pedestrian bridge and walkway will connect the project to the nearby Cedars DART rail station.

"They want the development to be a mixed-use entertainment district," Holley said.

The site benefits from its proximity to the Dallas Convention Center and the South Side on Lamar district, Holley said.

Seib and Bryant became interested in the Trinity development last year when they worked on a proposal for a new convention hotel. The convention hotel project – which faces approval next month by Dallas voters – is being headed by the city of Dallas and another developer, Matthews Southwest.

Seib said in a prepared statement "that to succeed, a convention hotel has to have vibrant adjacent area containing multiple entertainment venues and options, which is, in turn, made more successful by proximity to the convention hotel. That's what we are developing."

Earlier this month, Bryant and Pierce's Reunion Sports Group bought United League Baseball out of bankruptcy. The 3-year-old minor league has teams in Amarillo, Edinburg, Laredo, San Angelo, the Rio Grande Valley and Alexandria, La.

Pierce said Reunion has been involved in minor league baseball since the early 1990s and already has built three smaller baseball stadiums of about 5,000 to 6,000 seats.

"We will build the stadium in downtown Dallas independently, and everything else in the project will follow," Pierce said.

Nearby property owners say the complex would be a big plus for the area, which is slowly redeveloping from an old industrial district into new housing and other uses.

Jack Matthews, who redeveloped the landmark Sears Roebuck building on Lamar Street into loft apartments, says the entertainment project would fit well in the neighborhood.

"We'd be very happy if they are successful in what they want to do," he said.

The same area was previously considered as a site for the new Cowboys stadium that is being built in Arlington.

War Of Words Over Proposed Dallas Hotel Heats Up

Fifteen days from now voters will decide the fate of a Downtown Dallas hotel. The war of words continued to escalate as more people joined sides over the proposed 1,000-room convention center hotel.

Opponents accuse city officials of lying about the latest feasibility study. City leaders say they stopped the study until the bond market improves, and they're ready to sell bonds. But that won't be done until after the election - if at all.

"They're playing a game here. It is the job of our city council to be open and honest with the taxpayers about the risk of the project, but they're not. They're hiding the ball," said Anne Raymond, Director of the Citizens Against The Taxpayer-Owned Hotel.

City leaders are angry over the accusations.

"I'm taking no questions. There is no report and when there is a report, we'll share it with everybody," said Dallas City Manager Mary Suhm.

The city-owned hotel project won new backing Thursday when the group 'Rest In Peace Dallas' showed its support at city hall.

Opponents are bankrolled by Harlan Crow, whose family owns the Hilton Anatole, one of the city's largest hotels. The hotel also conducts a lot of business with the convention center.

Some downtown hotels, including the Hyatt Regency, which also hosts conventions, say the proposed hotel will attract large conventions that don't come to the area now.

"A large number of attendees need to participate and stay at a large number of hotels," said Steve Vissotzky, the General Manager of the Hyatt Regency.

"It shouldn't happen. The city doesn't know how to compete in the hotel business," said Raymond.

If voters approve the proposed convention center hotel, it could open in 2012.

Early voting starts this Monday. Election Day is May 9.

(DALLAS (CBS 11 News)© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

Texas housing poised to rebound quickly, builders group leader says

The Texas housing market is likely to be one of the first to recover when the nationwide building slump is over, the head of the country's largest homebuilding association says.

Joe Robson, chairman of the National Association of Home Builders, was in the Dallas area Thursday talking with local builders and helping kick off a home tour to replace this year's Parade of Homes.

Robson, a builder from Tulsa, Okla., who heads the trade group based in Washington, D.C., said Dallas and Texas in general have held up very well during this recession. "All over Texas, they've done a pretty good job of keeping housing inventories in check."

The supply of unsold new homes in North Texas is less than half what it is in hard-hit markets in California and Florida. But that doesn't mean the housing industry here hasn't suffered.

Single-family home starts have fallen more than 60 percent since the peak in 2006. And several prominent homebuilding firms in the area have gone out of business.

Statewide, the Texas Association of Builders estimates that it's lost a couple of hundred company members.

"We've seen some fallout and are likely to see some more," said Texas builders president Ron Connally of Amarillo. "There are a lot of good builders out there who haven't done anything wrong who have been caught."

The National Association of Home Builders has seen its membership decline by almost 50,000.

"Our biggest obstacle is getting the financing," Connally said. "We very well could wake up and see shortages in the market by the time this thing sorts out."

The shortage of financing is also the reason the Home Builders Association of Greater Dallas isn't putting on its Parade of Homes this year. Instead, the builders group is holding an open house of completed homes and building sites scattered throughout the Dallas area starting this weekend.

The association usually builds model custom homes to show consumers the latest trends in building.

"There just wasn't the kind of funding available that builders need to do this," Dallas builders executive vice president Bob Morris said. "Home parades across the country are stalled."

The association also set up a special Big Home Tour Internet site,, where consumers can look at the latest innovations and plan new homes with builders.

"In the past, we've always had a tremendous inventory of homes for people to look at," said Garland builder Jerry Carter, who organized the Internet marketing effort. "In this market, believe it or not, the inventory of homes is shrinking daily.

"Our solution was to use the digital world where builders can show homes or concepts," he said.

The builders also said that the recently enacted $8,000 federal tax credit for first-time homebuyers has caused a spike in their business.

"In the first two months it's been in existence, about 600,000 homebuilders across the country have taken advantage of it," Robson said. "Certainly it's working in Tulsa, where I'm from, and in Texas.

"How much is it working in California, Florida and some of the places really underwater that are priced higher?"

Robson said he's optimistic that the U.S. housing downturn will bottom out this year, in part because of low mortgage rates and incentive programs aimed at luring consumers back to the market.

"The affordability factor is higher than it's been since statistics have been held," he said. "We are at historic lows on mortgage rates."

By STEVE BROWN / The Dallas Morning News

Wednesday, April 22, 2009

Tough Times Pressure Maguire to Restructure Debt on Texas Complex

Robert Maguire, who stepped down last year from his post as chief executive of Maguire Properties Inc., isn't the kind of guy who walks away from a fight.

He fought hard to hold onto his company, the largest office building owner in downtown Los Angeles. Mr. Maguire resigned as chief executive last May after his bid to take the company private failed. This year, Mr. Maguire disclosed that he had accumulated 19.4% of Maguire Properties' equity and might try to take back control of the firm.

A slump in business travel has pushed occupancies at the Marriott hotel at Maguire Partners' Solana complex into the 60% range.

Now, Mr. Maguire, 74 years old, is facing pressures from loans on Solana, a mixed-use property he owns through his private company, Maguire Partners.

Solana is located in the cities of Westlake and Southlake, Texas, near Dallas-Fort Worth International Airport and contains about 1.9 million square feet of office and retail space and a newly expanded hotel. The complex's office and retail vacancy rate, usually in the 5% range, has risen to about 10%, according to Maguire Partners.

Among the shrinking tenants: Sabre Holdings Corp., which owns online-travel agency Travelocity, last year opted not to renew its lease for about 145,000 square feet of office space, though it still occupies space in the complex.

The tougher times have pushed Maguire Partners to ask lenders to restructure payments related to some $360 million in debt secured by the property.

"It made sense to take the bull by the horns and say, 'Let's talk and let's fix it,'" said Tom Allen, a partner with Maguire Partners. Mr. Maguire, who is managing partner of Maguire Partners, characterized the move as a "fairly routine" request to change the structure of funding the loans' reserves. Reserves are typically part of a borrower's payments that are set aside for such uses as improving the property for new tenants.

Companies who rate commercial mortgage-backed securities, or CMBS, saw the request differently. Asking to modify the terms of debt, even reserves, is considered a request for debt relief that triggers the transfer of the property to companies known as special servicers that handle loan workouts, said Adam Fox, a senior director at Fitch Ratings' U.S. CMBS group.

Last month, Fitch placed the transactions that include the Solana loans on rating watch for a possible downgrade. Likewise, Realpoint LLC, a Horsham, Pa., credit-ratings firm, also put the debt on its watch list for possible default.

A Realpoint report said one company servicing a portion of the debt said the borrower had requested relief due to an "inability to cover debt service" after the expiration of an office lease and poor performance of the Marriott hotel. The slump in business travel has pushed occupancies at the Marriott hotel down into the 60% range, said a person familiar with the property.

The loans are fixed at a 6.1% interest rate and mature at the end of 2013, Realpoint said.

Mr. Maguire maintains he hasn't defaulted on his loans and that the concerns that he is in danger of doing so are "overblown." He also lamented the lack of flexibility that comes with CMBS loans.

"We have a very attractive CMBS loan ... but CMBS loans are cumbersome to administrate," he said in a statement.

Other big landlords also have had problems with the CMBS structure. Executives at General Growth Properties Inc., which entered one of the biggest-ever real-estate bankruptcy reorganizations last week, partly blamed its difficulty in dealing with CMBS special servicers for its Chapter 11 filing.

It was back in the 1980s that Maguire Partners first began developing the nearly 1,000-acre tract that was to become Solana. It now represents a large chunk of the five million square feet of commercial real estate that Mr. Maguire owns through Maguire Partners and various other companies.

His holdings also include roughly 60 acres of hangar, office space and fuel farms at Van Nuys Airport in Los Angeles.

Mr. Maguire declined to say what would happen should the request for renegotiating the loans not be accepted. But there is also some Texas-style hope on the horizon. In June, a joint venture between Maguire Partners and Range Resources Corp., of Fort Worth, will begin drilling natural-gas wells in Solana.

"It should be very, very profitable," Mr. Maguire said.

Mr. Maguire declined to comment on the status of his efforts to reclaim control of Maguire Properties. In a January filing he disclosed that he pledged a large portion of his shares in Maguire Properties as collateral securing a personal loan from Wachovia Bank NA that matures on June 1, 2010.


Hillwood cedes stake in Victory Park to German investors

Ross Perot Jr.'s Hillwood development company has agreed to give up its stake in the high-profile Victory project surrounding American Airlines Center.

Hillwood will lose about $100 million in a new agreement with German investors who provided equity for the signature Dallas retail and office project.

While the company will continue to operate and manage Victory, it has committed to surrender its ownership position in most of its buildings.

The deal represents a huge concession by the Perots – one of Dallas' most prominent business families – who staked their reputation and investment dollars on the success of the Victory project.

Last month, investors in the German real estate fund US Treuhand were warned that Hillwood could default on its obligations because of the deteriorating U.S. economy and real estate market.

The German investor began providing equity for large portions of the Victory development in 2006. The Hamburg-based investment group has sunk more than $185 million in Victory.

After making initial payments to the Germans, Hillwood was unable to continue providing anticipated returns on the project.

Hillwood is close to finalizing new terms with the Germans and the bank lenders that will keep Victory out of bankruptcy, officials with the Dallas real estate firm said.

"Hillwood Victory is in negotiation with its equity partner, US Treuhand XVI LP, regarding the future of the existing vertical development at Victory Park," the company said Tuesday in a brief statement. "We are working together to bring a fresh infusion of capital to the district to enable Victory Park to move forward with new restaurant and retail development.

"Our highest priority has been and will continue to be the success of Victory Park."


Investors in the German real estate funds still have to sign off on the deal.

And as part of the restructuring, Hillwood may also have to give additional cash to the investors, according to German press reports.

Hillwood has put $68 million in equity in the venture.

The restructuring will give Victory's operators time to make the project profitable.

"We have arranged stable, legal and economic relationships for the next three years," US Treuhand chief executive Lothar Estein told The Financial Times of Germany.

The ownership of Victory's buildings is complicated, with multiple owners for each one, but almost every building in the development is partially owned by Hillwood.

Hillwood declined to give details, but the restructuring involves ownership stakes in most of Victory's buildings with the exception of American Airlines Center, which is a public building. The restructuring does not include the raw land.

The project

Hailed as one of the boldest redevelopments in Dallas history, the 75-acre Victory project was planned as a catalyst for center city renewal.

Hillwood and its partners built a series of residential, office, retail and hotel buildings on the northwest edge of downtown starting in the late 1990s.

After initial success, Victory ran into problems last year because of falling retail occupancy and weaker-than-expected demand for high-end housing.

Hillwood has been working since late 2008 to broaden Victory's appeal with a wider range of restaurants and shops.

Getting the problems at Victory solved and avoiding a drawn-out foreclosure and bankruptcy process is important, Dallas real estate executives said.

"Where there are problems, the quicker they are identified and worked out, the better it is for the project," said Joel Pustmueller, a partner with Dallas-based Peloton Real Estate Partners. "I'm glad Hillwood is staying involved because they had the vision for the project."

John Crawford, who heads the central city economic development agency DowntownDallas, agrees that a quick solution to the Victory dispute is preferable.

"It's a good thing when an amicable solution can be reached quickly and all parties keep working for the benefit of the project," he said. "It's also better for the downtown area – it lessens the impact."

Crawford also doubts that Victory will be the last high-profile project to wind up in restructuring.

"We are in interesting times, to say the least," he said. "This could be a leading indicator for other changes that occur not only in downtown but throughout Dallas."

Staff writer Elizabeth Souder contributed to this report.

By STEVE BROWN / The Dallas Morning News

Monday, April 20, 2009

Behringer Harvard, ABM Industries partner

Behringer Harvard, which manages real estate portfolios in Dallas and across the country, said Monday it has entered into a property management agreement with ABM Industries -- an initiative that will impact how the company operates four buildings in its North Texas portfolio.

The buildings impacted include the Alliance Data Systems building in Dallas; the Centreport Office I property in Fort Worth; Centreport Office II also in Fort Worth; and Burnett Plaza in Fort Worth.

As part of the agreement, Addison-based Behringer Harvard will be able to tap into ABM Engineering Services’ maintenance and consulting services to find cost savings and help implement efficient building operations within the impacted facilities.

ABM (NYSE: ABM), which works through subsidiaries like ABM Engineering Services, is a facility services contractor.

Jason Mattox, chief administrative officer for Behringer Harvard, said, “Partnering with ABM Engineering is expected to improve our competitiveness by giving us affordable access to the skills, talent and resources we will need going forward to effectively and efficiently operate our properties and continue to meet the needs of our tenants.”

The agreement allows New York-based ABM to provide training for engineers at certain Behringer Harvard properties and access to ABM’s own team of engineering staff members. In addition, the partnership is expected to increase Behringer Harvard’s engineering management network and to cut pricing tied to supplies and other services, which will be purchased through ABM’s network of vendors.

Dallas Business Journal

Friday, April 17, 2009

GMC Supplier Signs for 186,000 SF

Flex-N-Gate will continue providing bumpers and other components to client General Motors Corp. with help from its 186,344 square feet facility across the street from Arlington's GM plant. The Canadian-based Flex-N-Gate, which signed a five-year lease for the warehouse space, provides bumper assemblies for GMC's Chevy Tahoe trucks, Cadillac Escalade vehicles and other sports utility vehicles.

CB Richard Ellis vice president Corbin Crews, who represented landlord CRP-2 West Dallas LP in the transaction, says Flex-N-Gate had been occupying the free-standing building at 2400 Centennial Dr. for some time. The building was developed in the late 1980s as a build-to-suit for Wickes Furniture Co. Inc. When Wickes was bought by Rooms-To-Go during the early 2000s, it vacated the building and eventually sublet it to Flex-N-Gate says Crews, who is with CBRE's Dallas office.

The building had a quoted ask of $3.25 per square foot net. Crews says it had been marketed for a time while Flex-N-Gate was examining other options once its sublet expired. A workable deal between tenant and building owner was struck, however, and with little fanfare. Crews tells Flex-N-Gate is paying more for its full-term lease than it did under the Wicks sublet, and the owner is getting less, but "it was a good compromise for everyone. We're happy to have Flex-N-Gate there."

Crews explains the Arlington warehouse is a sourcing operation for Flex-N-Gate. The company's plant in Ada, OK manufactures bumper parts, then ships them to Texas. Once in Arlington, the parts are assembled, then delivered to the GMC plant.

"It's why Flex-N-Gate has to be across the street," Crews says. "GM has just-in-time inventory, meaning they take (the bumpers) when they need them." Even better news for the tenant is that the GMC Arlington plant is the only one in the country still working on SUVs. "This is pretty amazing, considering everything we're reading about GMC," Crews says.
By Amy Wolff Sorter of

Downtown Dallas bucks trend with increase in office building occupancy

Downtown Dallas was the only major U.S. central business district that saw an increase in office building occupancy during the first quarter, according to a new report by Cushman & Wakefield Inc.

Overall vacancy in Dallas’ core fell slightly to 27.2 percent compared with 27.6 percent at the end of 2008, the real estate service firm said Thursday.

Nationwide average downtown office vacancies rose to 12.5 percent from 11.2 percent at the end of last year. That’s the highest downtown vacancy average since 2006.

Net leasing in downtown Dallas during the first three months of 2009 added up to almost 100,000 square feet.

Across the country, downtown office leasing activity fell by almost 40 percent in the first quarter, Cushman & Wakefield said. And center city rents dropped by more than 2 percent.

But in Dallas, first-quarter net leasing was up a bit from a year earlier and average quoted rents were virtually unchanged.

Downtown Dallas office rents which average under $20 per square foot are about half the national average for central business districts.

By STEVE BROWN / The Dallas Morning News

Tuesday, April 14, 2009

Mitigating job sprawl: Suburbs play a role, too

Good morning. Let's talk job sprawl. Dallas has got a lot of it, according to research announced last week by Brookings. (Read a summary here and full report here.)

Only 10.6 percent of Dallas' jobs are within three miles of downtown, explaining why last year's news that AT&T would move its headquarters downtown drew such raves from civic leaders.

(Steve Brown wrote about this for the paper last week, and Downtown Dallas boosters pointed out that moves like AT&T relocation to downtown mean we are reversing course. Let's hope so, but some other companies may be headed the other way, and Brookings' research suggests that long-term trends are slow to reverse.)

Downtown Dallas does a better job keeping its share of jobs than Atlanta, Miami, and Los Angeles, which have 8 or 9 percent of their jobs in the downtown core. But other major cities far outpace us in this regard, including San Francisco (23.7 percent), Seattle (19.1), Philadelphia (15.5) or St. Louis (14.1).

There are lots of reason for this. Maybe the most obvious is that each of those four cities above are located on the sea coast, or on the shores of a major river, which acts to constrain their growth in at least one direction.

By contrast, Dallas extends out into flat lands for as far as the eye can see. As a result, fully 66.9 percent of Dallas jobs are more than 10 miles from downtown. (And, by the way, it's not just a Dallas problem. Austin and Houston ranked 5th and 6th, respectively, in terms of losing jobs from the core to the outer rings.

What has this got to do with transportation? Plenty.

Job sprawl can have big costs. It can make us as individuals spend more time in traffic, more money on gas, and replace our cars more often. As a community, it can mean more roads to be built, more and longer rail lines, and more air pollution.

But maybe the most interesting part of the report, authored by Elizabeth Kneebone, is that it concludes that job sprawl doesn't have to be a disaster for communities. If jobs are rooted in what demographer Robert Lang of Virginia Tech calls "edge cities" -- communities that are built organically, no matter how far from the urban center -- then the negative impact may greatly be reduced.

If new residential development keeps pace with commercial and industrial development, then employment decentralization need not mean that people become further geographically separated from their jobs. However, as Lang demonstrates, a predominant form of new development in major metro areas is "edgeless," where new offices spread out along interstates and other commercial corridors, and not in "edge cities" that can truly integrate residential and business uses. The resulting separation may exact costs by raising commuting times and congestion, and by limiting the range of transportation options that can serve low-density job development.
My colleague Ted Kim wrote an interesting on Sunday about slowing growth in the exurbs, those endless subdivisions that have sprung up in once tiny towns at the edge of Dallas-Forth Worth urban area.

He writes:

"In places like Celina and Sanger, Princeton and Ponder, the steady march of the suburbs has all but stopped. Builders have gone under. Vacant lots now checker many subdivisions. And communities that not long ago were seemingly destined to become Dallas' next great megaburbs are tempering their forecasts."

Folks in downtown are going to keep cheering for big wins like AT&T, but in the meantime maybe the slowdown at our edges will give us more time to think through how we develop on our edges, too. Putting jobs in close proximity to where people already live -- including our suburbs -- rather than continually sending them out to places where we think they might one day live could be a good start.

Let us know what you think.

Friday, April 10, 2009

New Dallas real estate company sees hope in downturn

A new Dallas-based real estate company hopes to find profits in the current property market downturn.

Real estate execs Adam Schiller and Brian Murphy – formerly with Austin-based Endeavor Real Estate Group – are teaming up with a group of Dallas principals to found Edge Realty Partners.

The firm will focus on retail development, brokerage and investment services.

"In spite of the current recession, we see great potential in these areas," Murphy said.

Former Staubach Retail execs Greg Bracchi, Steve Ewing, Mike Leonard and Michael Stern will also be principals in the new firm.

The just-formed company is already working on a project in Forney and one in Houston.
By STEVE BROWN / The Dallas Morning News

Two-story office building planned in Oak Lawn

A busy Oak Lawn corner will soon be getting a new retail and office building.

American National Bank of Texas is building the two-story, 17,000-square-foot building at Oak Lawn Avenue and Brown Street. The property just west of the Melrose Hotel is now used for a parking lot.

Houston-based McCleary German Architects designed the brick building, which will be finished in early 2010.

"They are going to have about 8,000 to 9,000 square feet of space for lease in the building" along with American National Bank's facilities, said broker David Glasscock of Colliers International. "They wanted some extra space for when the bank grows that they could also lease to other businesses."

By STEVE BROWN / The Dallas Morning News

Thursday, April 09, 2009


Let us share with you a little about what’s right with America. Let us tell you about the most productive,imaginative and successful economy in the world and about the sheer dominance of its power, size and imagination.

Think of the world community of 6.7 billion people as being represented by 100 persons. In a world made up of only 100 people, five of them would live in the United States and 95 would be citizens of other countries.
These five people would:

Own 34% of the world’s equity market capitalization,
and the other 95 would share the other 66%.

Own 25% of the gross world product.

Be the largest importer of goods.

Have a gross national product more than two times
that of Japan and larger than that of the European
Union combined.

Have a gross domestic product larger than the next
four largest economies on Earth (Japan, Germany,
China and Great Britain).

Own the most cars, trucks and motorcycles per
capita in the world, with more than 250 million
registered vehicles.

Drive on the world’s most extensive highway system.

Be responsible for technological breakthroughs that
have changed the lives of the other 95: electric
lights, telephones, airplanes, the mechanical
harvester, television, computers, the CAT scan, the
Internet, the iPod — and the list goes on.

Have put a man on the moon. They would also
have designed and built the majority of airplanes
and jets flying in the world today. Their country is
home to 16 of the world’s 30 busiest airports.

Produce the world’s largest supply of electrical
energy. They would also share within their borders
nearly half of the free world’s known coal reserves.
That is more than a 147-year supply at current
rates of use. Its energy content exceeds that of all
the crude oil in the Middle East.

Grow more than 40% of the world’s corn and about 9% of the world’s wheat. They are also the leading producer of soybeans.

They are one of the largest
exporters of agricultural products
and a leader in farm productivity,
while agriculture accounts for
about 1% of GDP.

Account for 37% of all Nobel Prize winners.

Have the strongest military, accounting for 37% of global military spending and greater than the next 14 largest nations combined.

Donate the most to charities and give more than twice as much as the next closest country.

All of these superlatives can be boiled down to the long-term growth of the economy and the growth of assets, profits and dividends of American corporations. And those American corporations are largely the legal property of their 90+ million American shareholders. These are the men and women who have recognized the value of investing in America’s exciting and bountiful future through the U.S. equity markets

Local Investors Buy 387-Unit Willow Pond

DALLAS-Local buyer WPA Investment Group Ltd. has pulled the 387-Unit Willow Pond Apartments from foreclosure proceedings. The new owners assumed a $6 million loan on the 42%-occupied asset and will invest just under $1 million to renovate and bring empty units back online.

Clark S. Willingham, who is sponsoring the investment group, tells that approximately 140 units are offline. The good news, he says, is that five units at the 6003 Abrams Rd. affordable housing complex will be back online within the first week of renovation.

Willingham says he became aware of the property when associate Tim Kay brought it to his attention. Willow Pond, built in the 1970s, was being held in receivership by Centerline Capital Group because former owner Homes for America Holdings Inc. of Yonkers, NY, couldn't afford to pay the loan.

"They'd been overly exposed in Florida, and were out-of-state owners," Willingham adds. "They just ran out of money." With the loan assumed, the note will return to KeyBanc, which issued the original paper. Jeff Dowdle and Mark Dowdle with Marcus & Millichap Real Estate Investment Services represented the seller in this transaction.
Willingham says the plan for Willow Pond is to improve cash flow by getting the units up and rented. He has no plans to raise the rents, either, noting the asset should provide nice cash flow once it's stabilized.

One thing in Willow Pond's favor is many of the competing apartments in the area have been scraped for planned mixed-use developments by Trammell Crow Co. Willingham says he has no intention of flipping the asset and is in it for the long haul.

"This is a Section 8 project. There are another 2.5 years in the primary term and 15 years after that," he says. "We're not here to renovate and get out. We're here to improve and operate."

Willow Pond has a mix of efficiencies and one-, two- and three-bedroom apartments. Unit sizes are between 400 square feet and 1,400 square feet. Monthly rents are from $429 to $999.

By Amy Wolff Sorter-

Tuesday, April 07, 2009

Cirrus To Build $24M Rehab Center

Reliant Rehabilitation Hospital

DALLAS-Cirrus Group will launch construction later this month on a 65,000-square-foot build-to-suit rehabilitation hospital for Reliant Healthcare Partners. If all goes according to plan, Reliant will be able to lease and operate the $24 million center by this time next year.

The as-yet unnamed hospital, which will be at Northaven Road and U.S. 75 is Reliant Healthcare's first in Dallas proper, though it has similar facilities up and running in other parts of Texas including Austin, Houston and Richardson. The project is also the first time the Addison, TX health care company partnered with Cirrus Group as developer. The facility will offer 40 beds licensed for inpatient rehabilitation and 20 beds licensed for skilled nursing.

Cirrus Group director of finance Chris Godfrey tells the developer just closed on a $16.7 million loan for the construction. Colonial Bank issued the three-year, floating rate loan and Godfrey acknowledges he's grateful to have it. In the current economy, those on the equity and debt side aren't so quick to loosen purse strings for construction projects.

However, "both the lender and equity partners were excited about this," Godfrey says. "The fact it was a healthcare project played a large part in getting the financing." Healthcare real estate developments, though not recession-proof, are still viable as far as lenders are concerned, Godfrey says.

Also helpful when it came to obtaining the loan was Reliant's track record as a proven operator that could tenant the facility once it was open. Finally, Cirrus Group's relationship with Colonial Bank worked in the project's favor. "We've worked with Colonial on other projects before and they know our strong track record as developers of medical real estate," Godfrey says.

By Amy Wolff Sorter,

Texas 13th in 'financial happiness'

Texas ranks 13th in a new “Happiness Index,” based on economic well-being in the U.S.

The survey, from, a personal finance site, found that the Midwest was one of the most financially content parts of the country.

Nebraska ranked No. 1, followed by Iowa, Kansas, Hawaii and Louisiana.

The ratings were based on a cross-section of key financial factors: average non-mortgage debt relative to average annual income, foreclosure numbers and the unemployment rate.

Texas was noted for having lower than average unemployment as well as non-mortgage debt as a percentage of income.

Oregon ranked 51st in the survey; Florida was ranked 50th, followed by California, 49th, and Nevada, 48th.

Dallas Business Journal

Monday, April 06, 2009

Dallas-Fort Worth apartment occupancy drops in the first quarter

The slowdown in the local economy is hitting home for apartment landlords.

Overall apartment occupancy in the Dallas-Fort Worth area dropped by more than 2,000 units in the first quarter of 2009 as renters bailed out of the market, according to a report released Thursday.

The significant decline in apartment demand was "not a surprise, given that Dallas-Fort Worth now has joined the rest of the country in losing jobs," said Greg Willett, vice president of research for apartment consultant M/PF YieldStar. "The near-term performance outlook appears pretty dismal."

The first-quarter negative leasing comes on top of 6,000 net move-outs in the final quarter of 2008. Apartment analysts attributed the declines to renters doubling up to save money or leaving the D-FW area to look for jobs.

During the 12 months ending in March, total apartment occupancy in North Texas dropped more than 7,000 units, M/PF YieldStar estimates. That's caused overall occupancy to dip about 3 percentage points from a year ago to 90.4 percent at the end of March.

Rents remain an average of $755 a month.

Unless the economy rebounds, the situation is likely to get worse in the months ahead, analysts say. Almost 23,000 additional apartment units are under construction.

"While it will be a struggle to generate any demand when jobs are being cut, the real damage will come from the over-the-top volume of new supply in the pipeline," Willett said.

Most of the apartments being built are in Dallas' northern suburbs, including West Plano, Frisco, McKinney and Allen.

An additional 3,000 rental units are under construction in central Dallas neighborhoods including Uptown, downtown and Oak Lawn.

Until last year, the apartment sector had been one of the best-performing real estate markets in North Texas. The 5,600-unit decline in net D-FW occupancy last year was the first decrease in more than a decade.


First-quarter 2009 statistics

Apartment completions 2,515 units
Apartment demand {TriDown} 2,030 units
Average monthly rent $755
Average occupancy 90.4%
Units under construction 22,951

SOURCE: M/PF YieldStar

The Dallas Morning News

Last condo is sold at SoCo Urban Lofts

It took a while to get there, but one of downtown's biggest condominium projects has sold out.

Developer Westmount Realty Capital is celebrating the sale of the last unit in the SoCo Urban Lofts building on Jackson Street.

The 203-unit residential building was built in the 1920s as a Santa Fe Railroad warehouse.

In 2005, Westmount turned the property into a residential condominium and began selling units to folks who want to live downtown.

"It took four years to sell the 203 units," Westmount CEO Cliff Booth said. "It would have been nice to sell out earlier, but we are very pleased with the project."

The units, which average just over 1,000 square feet, sold for about $170 per square foot, Booth said.

Westmount's last buyer in the building, Marie Patti, will receive a housewarming party complete with gifts from downtown merchants and a visit from dignitaries including Dallas Mayor Tom Leppert.

Patti just spent a year in Iraq with the Army.

The Dallas Morning News

Commercial foreclosures up 14% so far in '09

The number of Dallas-Fort Worth commercial properties facing foreclosure rose 14 percent in the first four months of 2009 compared with the same period last year.

The volume of commercial real estate loan defaults is still relatively low, but analysts are anticipating a big increase this year.

So far in 2009, 658 commercial properties have been posted for foreclosure in the D-FW area, Addison-based Foreclosure Listing Service said Thursday. Even though the number is low, it was the highest for the D-FW area in 17 years.

The 658 filings represent only about 3 percent of the total real estate foreclosure filings. The rest are for homes.

Most of the commercial properties faced with forced sale by lenders are raw land and apartments, Foreclosure Listing Service found.

Commercial property foreclosure filings were up 27 percent for all of last year.

George Roddy, president of the firm that tracks foreclosures in more than a dozen Texas counties, said he thinks this is just the start.

"Everybody I talk to is expecting a lot worse, and I am too," Roddy said. "Although, when you compare it to 1988 or 1989 [during the last major real estate downturn], this is minimal."

The greatest increase in commercial foreclosure filings this year were in Collin and Denton counties, where postings more than doubled from a year ago.

There also has been a big change in the type of commercial buildings falling into foreclosure during this cycle.

"In the late 1980s, I saw a significant amount of signature Class A properties posted for foreclosure," Roddy said. Most of the recent commercial foreclosures were for older and smaller buildings, he said.

Recent national reports show that mortgage delinquencies for commercial buildings such as hotels, offices, warehouses and shopping centers are four times higher than they were a year ago.

Many commercial building owners have been unable to get new financing for their properties because of the credit crunch. More than $200 billion in commercial property loans are scheduled to come due during the next few years.

"We are not into this thing very far," Roddy said. "It's going to get real dicey."

The Dallas Morning News

Commercial foreclosures up 14% so far in '09

The number of Dallas-Fort Worth commercial properties facing foreclosure rose 14 percent in the first four months of 2009 compared with the same period last year.

The volume of commercial real estate loan defaults is still relatively low, but analysts are anticipating a big increase this year.

So far in 2009, 658 commercial properties have been posted for foreclosure in the D-FW area, Addison-based Foreclosure Listing Service said Thursday. Even though the number is low, it was the highest for the D-FW area in 17 years.

The 658 filings represent only about 3 percent of the total real estate foreclosure filings. The rest are for homes.

Most of the commercial properties faced with forced sale by lenders are raw land and apartments, Foreclosure Listing Service found.

Commercial property foreclosure filings were up 27 percent for all of last year.

George Roddy, president of the firm that tracks foreclosures in more than a dozen Texas counties, said he thinks this is just the start.

"Everybody I talk to is expecting a lot worse, and I am too," Roddy said. "Although, when you compare it to 1988 or 1989 [during the last major real estate downturn], this is minimal."

The greatest increase in commercial foreclosure filings this year were in Collin and Denton counties, where postings more than doubled from a year ago.

There also has been a big change in the type of commercial buildings falling into foreclosure during this cycle.

"In the late 1980s, I saw a significant amount of signature Class A properties posted for foreclosure," Roddy said. Most of the recent commercial foreclosures were for older and smaller buildings, he said.

Recent national reports show that mortgage delinquencies for commercial buildings such as hotels, offices, warehouses and shopping centers are four times higher than they were a year ago.

Many commercial building owners have been unable to get new financing for their properties because of the credit crunch. More than $200 billion in commercial property loans are scheduled to come due during the next few years.

"We are not into this thing very far," Roddy said. "It's going to get real dicey."

The Dallas Morning News

Dallas-Fort Worth builders getting a break on construction costs

The recession and sharp slowdown in construction has at least one silver lining: Builders who are still starting everything from houses to high-rises are getting a break on construction costs.

When Ron Davis started working on his latest home in Dallas' M Streets, he was pleased to find that costs that were lower than he expected.

That's quite a switch from a couple of years ago.

"Back then, they were raising prices every time you turned around" for construction materials, labor and land, Davis said. "Now there are a lot less homes being built. You are able to get price breaks here and there."

Dallas housing analyst Ted Wilson of Residential Strategies Inc. said that there are savings in most materials and labor costs. "Lumber is down, as are steel and petroleum-based products. Most prices are down 5 percent to 10 percent."

Concrete and roofing products are a couple of exceptions, with prices rising or holding up, Wilson said. Lumber futures prices have fallen more than 30 percent since last year. And copper prices are down by more than 50 percent.

For builders, the windfall is welcome.

Developer Granite Properties recently took a look at costs for an office building it's planning on State Highway 190.

"We had already priced the building in the summer of 2008," said Granite's Greg Fuller. "We repriced it for a prospective tenant, and it was now 13 to 15 percent less."


Granite also found that its high-rise 17 Seventeen McKinney office project in Uptown will cost less than originally budgeted.

While many of the costs were locked in, Fuller said, "we will save another 15 percent or so on the tenant space finish cost on that project."

Some price tags have fallen even further.

Dallas architect HKS Inc. has a new project at Texas Woman's University on Inwood Road in Dallas that will cost more than $34 million. Last year, the design firm priced the eight-story, multiuse building at about $220 per square foot.

"We ended up with costs in the $160 range," HKS associate principal Rex Carpenter said. "Now they are hoping to build a garage with the savings."

In recent years, Carpenter said, HKS did projects where the costs were constantly escalating. "It was changing so quickly we could never keep up with the upward curve."

Low for now

Cirrus Group found that the cost of its new North Dallas medical building dropped significantly in just a few months.

The company just received a $16.8 million loan to build the Reliant Rehabilitation Hospital on Northaven Road west of North Central Expressway.

"We priced in December of last year and then again in March of this year," Cirrus' Greg Francis said. "We recognized savings across the board, but most notably in steel and copper."

Falling construction prices may prompt some builders to hold back on groundbreakings in anticipation of cheaper costs, he said.

"The downward movement in construction pricing has certainly been a welcome change, with the only downside being that it encourages attempted market timing," Francis said. "Some of our clients have adopted a wait-and-see approach, not only due to market conditions, but also because they think they'll be able to lock in construction pricing at the bottom of the market."

Meanwhile, they can take additional capital markets risks, he said.

And most builders anticipate that the decline in prices is temporary.

"I think the prices right now are soft, but after the first of next year we'll see an acceleration of costs," said Davis, who is building a 3,600-square-foot house on Ridgedale Avenue that he hopes to sell for more than $700,000.

"All the manufacturers have held off on price increases because of the softness of the building market."

The Dallas Morning News

Saturday, April 04, 2009

Home Price Drop: Atlanta 14% - Dallas ONLY 4.9%

Home prices in the Dallas area dropped 2.4 percent between January of this year and December 2008 -- edging the Big D down to a point where home prices are 4.9 percent lower when compared to the previous year, the Standard & Poor’s S&P/Case-Shiller Home Price Indices said Tuesday.

After analyzing all of the Metropolitan areas studied in the S&P/Case-Shiller report, Dallas, Denver and Cleveland are still leading in terms of resilience with their annual price declines in the 4.9 to 5.2 percent range, the report says. These three markets have become somewhat of a silver lining compared to Sunbelt cities like Phoenix, where home prices are down 35 percent over the previous year.

Las Vegas and San Francisco saw prices drop 32.5 percent and 32.4 percent, respectively.

In the Dallas metro area, home prices peaked in June 2007, according to S&P/Case-Shiller. Current data shows home prices are now down 10.8 percent from that peak. In comparison, Phoenix is down 48.5 percent from its peak, which occurred in June 2006.

"Home prices ... continued their decline in 2009," said David Blitzer, chairman of the Index committee at Standard & Poor's. "There are very few bright spots that one can see in the data. Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and nine of the MSA's falling more than 20 percent in the last year."

CBRE: New space could impact vacancies

The first quarter of 2009 was both positive and negative for the Dallas-Fort Worth office market, with the area recording net absorption of 1.7 million square feet as the national economy began to take its toll in North Texas, according to a new “MarketView” report from commercial real estate firm CB Richard Ellis.

In terms of net absorption, Dallas-Fort Worth outperformed expectations, CBRE said.

Net absorption measures the amount of square feet leased in a market after subtracting the amount of space vacated during the same period.

While absorption exceeded expectations according to data from Real Capital Analytics and office sales leasing totaled $1.7 billion in the past 12 months, CBRE’s report says concerns remain over the high volume of speculative real estate space under construction in the D-FW market. Specifically, with the total vacancy rate down in the first quarter, CBRE’s report comments on how the balance of more speculative space will impact the area’s overall vacancy rate.

CBRE cites the Far North Dallas submarket as an example, saying 500,000 square feet of office space is under construction in that market, less than 3 percent of which has been pre-leased.

CBRE commented on this phenomena in its report saying: “In recent quarters, the completion of vacant new office space has reduced or negated the benefits of positive net absorption.”

The submarkets that experienced the most absorption in the first quarter included Far North Dallas, the Fort Worth Central Business District, Stemmons Freeway and Las Colinas. Meanwhile, the Central Expressway submarket experienced the largest amount of negative net absorption — a situation that is attributed to AIG’s decision to leave the submarket for the Dallas Central Business District, CBRE’s report said.

During the first quarter, office rental rates also fell, with the average rate hovering around $19.18, which is 21 cents below the fourth quarter rate of $19.39.

Dallas Business Journal